AutoZone upgraded to Strong Buy, Realty Income to Outperform: 4 big analyst picks

Investing.com — Here is your Pro Recap of the biggest analyst picks you may have missed since yesterday: upgrades at AutoZone, Realty Income , Shake Shack, and Devon Energy.

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AutoZone upgraded to Strong Buy at Raymond James

Raymond James upgraded AutoZone (NYSE:AZO) to Strong Buy from Outperform and raised its price target to $3,100.00 from $2,850.00 following better-than-expected Q1 earnings, as reported in real-time on InvestingPro.

The analysts expect fiscal 2024 to bolster the thesis that AutoZone will continue gaining market share in both the DIY and DIFM sectors due to an expanded parts inventory and availability, as the number of mega hub locations is set to double to 200 soon. Other factors include improved delivery times due to IT and SG&A investments, and favorable year-over-year comparisons due to last year's mild winter.

The analysts noted that Q1 demonstrated strong EBIT% and EPS, despite stable DIY comparative sales, further solidifying this positive perspective. Additionally, there are promising signs in AutoZone’s commercial business, as shown by the revenue acceleration in Q1. This trend is expected to persist throughout fiscal year 2024 as more mega hubs open.

“Lastly, we remain upbeat on the overall industry fundamentals (pricing environment remains rational) and AZO’s market share potential on a multiyear basis,” mentioned Raymond James.

Realty Income raised to Outperform

Wolfe Research upgraded Realty Income (NYSE:O) to Outperform from Peerperform with a price target of $66.00.

We think multiple industry and company-specific drivers contribute to an improved earnings outlook for O, while valuation is depressed due to transient events.

The analysts noted that the slowing economy benefits Realty Income, as net lease typically performs well in such conditions as lower rates help investment spreads while longer lease duration provides downside protection.

Furthermore, Realty Income's recent stock price decline, attributed to merger and tax-related selling, is seen as a temporary and opportunistic buying scenario.

Two more upgrades

Shake Shack (NYSE:SHAK) shares rose more than 3% pre-market today after Raymond James upgraded the company to Strong Buy from Outperform with a price target of $78.00.

The analysts cited two primary reasons for the upgrade: 1) the belief that Shake Shack is still in the early stages of improving margins and reducing development costs, and 2) the potential for unique opportunities in 2024 to enhance margins and possibly boost customer traffic, which could lead to better-than-expected performance compared to the current consensus for 2024 (which forecasts only a slight increase in EBITDA margins).

JPMorgan upgraded Devon Energy (NYSE:DVN) to Overweight from Neutral and raised its price target to $58.00 from $57.00.

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